Duolingo Rerating Due to Slowing Bookings

2 months ago

"Now, if we look at the 2025 outlook, they have something here called bookings. The Q4 bookings, so next quarter to grow 22% year-over-year or 19% on a constant currency basis at the midpoint. Now, why is this important? It's important because Wall Street believed that they were going to grow their bookings at around 24%, which is more than what they said they're going to grow. So, Wall Street's saying, "Oh, wow. Not only did they not meet their booking estimates or exceed it, but they didn't even come close. They're, they're below what we expected them to grow." And so, we see a company that's growing slower than expected. When a company's priced at a premium multiple and revenue slows down further than expected, you get stock prices rerated. So that is the single reason the stock is down today."

The speaker explains that Duolingo is experiencing a rerating as its Q4 bookings growth of 22% (or 19% constant currency) fell short of Wall Street's 24% expectation. This slower-than-expected future revenue growth is prompting a reevaluation of the premium multiple, despite strong user engagement metrics elsewhere.

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